Dipping My Keyboard Back Into The Ink

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Don’t Await Destiny. Go Create It

 

I have not updated my blog for some time since I was completing my book on credit cards, which is now available on Amaz
on, Kobo, B&N, Scribd and a host of other places.

 

Red Cover
The good news is that my red cover book “Credit Card Debt Freedom – Part One” is FREEBook front page jpegLY downloadable from the above places.

 

 

The black cover “Credit Card Debt Freedom – Full Book” is available for a small price.

 

I want to clear my debt of thanks to Conrad, Danie and Rupert (in alphabetical order) who beta-read my draft and also proposed positive critique of things which I may be able to get into future editions. I, of course, take full responsibility for the published versions.

 

Now on a point of order: During my blog absence there were a number of local and global issues in response to which I had written blogs but did not post them. I thought it wiser to let the blogs cool off for a while. However, on rereading them, I still feel as strongly about some of them now as I did then.

 

So, I may just dip my keyboard in the proverbial ink soon and publish what might divide opinion.

 

I Felt Amputated – And Home on a Sidewalk

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This is a note I wrote on 30 July 2014.

 

This morning I took a train into town to lodge my tax return. Being in semi-retirement with virtually no income for the past 18 months there was not a lot to report – just a few dollars interest and about $1,000 from some casual work. Not enough to last a winter.

The way to the Tax Office lead past an untidy long-haired bearded and shabbily dressed jobless vagrant on the sidewalk, appreciating his luck of a wrapped sandwich – gifted by a person a few steps ahead of me. A cup of coffee was still steaming next to him – another obvious gift. He did not look up, trying to avoid the stares of passersby – a thimble of pride left in him?

A twinge of empathy seeped itself into me. Winter. No fixed abode. A set of fraying and dirty clothes. Cement sidewalk for a chair – and bed.

As I sat waiting for the Tax Office to open, increasing larger pockets of people murmured by – well-heeled, chatting – some holding expensive brand name drinks and donuts. A thin layer of envy spread over me. Something was amiss.

I started to feel amputated.

The Tax Office doors opened and accorded an escape from myself. The soulless authoritarian Tax Officer and I disengaged as quickly as I could. And I then stepped into a food-court to sit down and gather my thoughts. Around me people sat at small round tables, doing what people do around small round tables.

Yes, I missed the dignity of work and what comes with it.

The way back to the train station became a lonely upstream weave against a flood of workers. The smell of freshly cooked chips wafted out of a shop.

I boarded an empty train home. Opened the plastic lunchbox with fried rice that my wife prepared for the journey. A few shelled peanuts rounded off my lunch – eating them one at a time. A minimalistic frame of mind was engaging me faster than I liked. Even the single paper serviette seemed to have more value than its one time use…

The only difference between me and the jobless “bum” seemed to be that I had a few more earthly things but in reality both of us were amputated.

There is no dignity in being poor, jobless, of pensionable age with nothing to do.

 

Postscript

And then it struck me: Amputated as I might have felt, I was going back to a house I can call a home. With running water and a toilet. A warm bed and clean clothes tomorrow. And hot soup on the stove.

I know where I sleep at night.

And I know where the Ministers of Health and Employment and Social Services sleep at night.

 

Quo Vadis?

But where do our homeless go at night?

 

Conclusion

Don’t underestimate the dignity and value of a job.

 

30 July 2014

 

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Auto-renewal of Car/House-relate Premiums on Credit Cards

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(This is an extract from my forthcoming book on Credit Cards)

 

  • Many insurance companies will now auto-renew your annual car / house-related premiums. This is not necessarily a bad thing, but also not necessarily a good thing.

 

Unexpected or Inconvenient Time

Unless you keep close track of this it may cause you an “unexpected” problem or at minimum a surprise at an often inconvenient time.

My recent experience is that:

(a) it is difficult to get real bricks and mortar car/house-related insurance offices to visit in Australia

(b) the auto-renewal stunt is pulled after they have recorded your credit card number during the sales conversation, and normally also in a much more matter-of-fact oh-by-the-way remark-like way.

 

“The Way We Do Business”

I had that experience recently and even though I asked for the auto-renewal to be removed, I was told that it is the way the company does business.

Check in your country if there is an authority that can give you more advice on this. In Australia the Australian Securities and Investments Commission has taken up this matter and six of the insurers informed that it is part of their business model. Of course you do not have to abide by this and can call them before the policy renewal date or even afterwards to cancel and get a pro-rata return.

  • One way to stop auto-payments is to not give your credit card number and insist that you will pay the premium at the Post Office or through an internet transfer (such as BPAY).
  • Another option is to buy a pre-filled temporary credit card which you can dispose of afterwards. These cards are normally also available at Post Offices. And the insurer (or whomever they are) cannot get their hands on your real credit card number. The ball is, however, now in your court to remember your premium payment’s date to ensure you do not become uninsured.

 

Reversal of Premium

You should be able to get a cancelled premium reversed though and that is often another bone of contention: trying to get them to reverse the debit in time for you to use your card to pay for a better deal.

I just went through that process and though the money is normally taken off your card immediately, it takes 5 – 7 business days for the card company to reverse the money back into your credit card account.

 

Cancel Your Card

  • There is another way to stop insurance companies and it is to cancel your credit card and get your bank to issue a new card. This is however a real hassle and it may cause issues with other transactions such as pre-paid flight tickets where you often have to present the card you bought the tickets with months earlier. But it is one way to protect yourself from such companies.

I also think you should be able to cancel and if the insurer auto-renews without permission then you should be able to take them to court for at least theft, but the law is an ass at the moment.

 

Shop Around at Renewal Time

The benefit and argument that the insurance companies use is that it keeps you insured. However, the decision should still be yours because near the end of the period you may want to (in fact perhaps SHOULD) shop around for a better premium.

  • It is known that insurance companies increase your 2nd year policy sometimes out of proportion since they know that they have already taken the money off your card.
  • And it is also known that insurers entice new customers with cheaper initial rates. Loyal customers pay the price to lure new clients instead of being rewarded for their loyalty.

 

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How Do Credit Card Companies Make Their Money?

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Credit card companies make money and line their pockets via at least 10 ways (and I am sure there are more) to generate untold billions of dollars per year.

We all have bills to pay and we all shop on a regular basis. How we make payments makes a difference. Most people will use a payment card (credit or debit) or cash. Few of us will, or for that matter, can live a truly cash life. And banks / credit card companies know and like that, because we remain loyal revenue-generating customers.

Credit card companies add significantly to the cost of living and which is considered by some as an unnecessary social cost, especially to the poor and those who do not or are not in a position to use credit cards. This is due to the 2%-4% merchant fees that are imposed on companies who accept credit cards as a mode of payment, which they configure into the prices they charge – and other merchants who then synchronize their prices with those who accept cards.

 

  1. Transaction fees

You often get charged a transaction fee for credit card transactions. I was in a book shop recently and a client wanted to buy something using a credit card. She was told that a transaction fee of 5% would apply at which point she left without buying anything from the shop. This connects in tandem with my next point. Note the prospective client was going to be charged 5%.

 

  1. Merchant fees

Merchants are normally charged a transaction fee of between 2% and 4% for every credit card transaction. This leads to several outcomes, some of which are considered anti-social:

Merchants normally put their prices up to cover for this fee – but do not tell us about it, since they consider it (and calculate it) as part of their operational costs. This means that we actually pay 2% to 4% more for things that we buy at places that accept credit cards. This is a huge cost to bear. The USA’s center for Nutrition Policy and Promotion calculates the average expenditure for a low-cost meal plan for a family of 4 to be $786 worth of food a month.

Do the sums: $786 x 12 = $9,432 per annum. At 2% or 4% means you pay $188 or $377 per year more for food due to merchant fees.

Even if you do not use a credit card to buy your food, you still bear this cost.

  • There are those who say that they use their cards to buy everything, collect whatever benefits they can and then pay off the card in full every month.
  • There are others who say that we should be given a discount of 2-4% when we pay either cash or with our own debit cards (equivalent to cash).

I am in this latter corner, since my wife and I use our credit cards only for such things as flight tickets (or buying books on the internet – the only internet shopping we do).

Credit card companies also offer numerous benefits such as “points / airline miles / present” which are priced into high interest rates thus adding to the social impact of credit cards on society.

  • Nothing in life is free. Someone pays for it.

 

  1. Product branding / Co-branding.

You help with branding the credit card companies’ products to merchants and other people. They colour their cards blue, red, back, gold, platinum and all colours of the rainbow to show the elitist use of some of their products. And compete with each other in terms of benefits as part of their brand.

Further, co-branded cards i.e. cards that are offered by a credit card company which is jointly sponsored by both the bank and a retail merchant can normally be issued cheaper than a normal privately labelled card AND – here is the clincher – it is normally designed to give the issuing bank access to the retailer’s customer base – i.e. YOU.

 

  1. Your information.

Your information is used for advertisement purposes. Regardless of what organizations say about guarding your private information, it does get into the hands of advertisers. They have little boxes on their forms to tick if you do not want to receive advertisement information but how come I get advertisements from wine cellars etcetera? And by the way this is also a huge problem with utility providers. I still get calls not only throughout the day but almost on the bell at midnight – may I ask from where and how they got hold of my home telephone number?

 

  1. Annual fees.

I was recently charged $30 for annual card fees, which I protested and had reversed by letting the person know that I have been a loyal card carrying revenue generator for 28 years. The fee was waived.

  • You should do the same.

 

Credit card interest rates (generally 18-21%) are exorbitant, especially when compared to the interest you get paid when you save your money with a bank (2 – 3%).

The reason the banks give for this anomaly is that credit card debt is unsecured debt and they lose part or all of the debts that people owe when people declare bankruptcy or negotiate a settlement on outstanding debt or in fact become delinquent and the debt is written off.

Well, card companies are often to blame themselves for this predicament. I have been at the receiving end of cards that arrived at my doorstep without even applying for them (especially in some countries) and they often do very sparse vetting – in an attempt to grab market share / to satisfy KPI’s in order to get annual bonuses.

 

  1. Late fees.

This can be an expensive mistake of between $10 and $35 depending on the bank / card company you are dealing with. In a recent class action against a bank in Australia late fees were found to be illegal but the bank challenged the ruling in the Full Federal Court and the ruling was overturned, meaning that it is legal to charge someone $35 for paying late.

Is the cost of the outstanding amount to the bank $35? What would be fair?

  • I believe the late fee should be calculated as the product of the outstanding amount, the number of days outstanding and a certain % interest rate.

 

  1. Cash advance fees.

Cash advance fees are just one of the increasing fees by way of which card companies make money. Over the counter (OTC) this can range from $2.50 to 2% of the transaction amount (whichever is greater).

 

  1. Cash withdrawals at ATM’s

Fees for cash withdrawal from credit cards are comparable to cash over the counter fees and is again just one of the fees by way of which card companies make money. This can again range from $2.50 to 2% of the transaction amount (whichever is greater).

 

  1. Balance transfer fees.

Most credit card companies now offer credit cards (multiple) debts consolidation with them onto one ZERO % card, meaning that you will not pay any interest on the outstanding balance until (a) a specified time has elapsed – normally 1 to 2 years (b) the amount is paid off OR (c) you use the ZERO % card to make a purchase – at which time the normal high (in most cases 18% – 21%) rate kicks in.

  • Be very aware of this third condition. It can all of a sudden become expensive since the interest rate is then calculated on your outstanding balance plus the new purchase.

But in addition to that, the bank normally also charge you a balance transfer fee.

  • Please ask a pertinent question about this if ever you consider transferring your debt to a ZERO % card.

 

In summary

 

Tread carefully with credit cards. You can land in a lot of financial trouble with them – at any age.

Credit cards comes at a social cost to society – all of us indeed whether you have / use one or not since we all pay more for goods at merchants who accept cards. And even those who do not accept cards (are there any left?) synchronize their prices with those who accept cards. This adds a huge social cost to society.

Credit cards will not go away. So you will have to learn with them and their impact to society.

 

 

 

Credit Card Fraud – $16.3 BILLION last year

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Credit card fraud is on the rise.

Important Points

Let’s look at some important bullets:

  • 2014 credit card fraud was $16.3 Billion (with a B)
  • Credit Card fraud (19%) outpaced the growth of credit cards (15%).
  • US fraud loss was 12 ¾ c for every $100.
  • Rest of the world fraud loss was 3 ¾ c per $100.
  • Estimates are that it will average $30 Billion per year over the next 6 years, by which time it would have more than doubled today’s figures to $35 Billion.
  • Banks / investigators estimate that is will decrease after 2020. I predict that it will not, especially with the Asian market still very much in growth/expansion mode. It will not slow down unless all credit card business stops – which will not happen.
  • New protective technology is introduced every year, but the fraudsters are often out-running the protectors.

 

Two points are important to note:

  • It sounds small – until you are the victim.
  • I hesitate to say that this is the full figure, since organizations and individuals may in fact hide some of the cases – for obvious reasons.

 

Five cases

Let me summarize 5 of my own cases:

  • 24 Dec 1973: Amex card stolen. Before the card was stopped I had lost a whole month’s salary. In 1974 things were different than today. It cost me
  • 2003: Received a call one Sunday morning informing that my card had been compromised in another country. I lost no money and my replacement card was with me within a week.
  • 2008: It took me 3 years to get an internet provider to stop billing me for services I terminated when I moved to another country. I had my bank behind me and we disputed it every month until we won the argument.
  • 2010: My card was compromised in another country (with a fraudulent card – something I will expand on more later) by someone buying first 4, then 2, then 1 airline tickets which he sold to people for trips between Australia and NZ. I was in Singapore at the time, and could prove it – luckily.
  • 2012: I made a one-time payment from Singapore to a company in the US, which they subsequently auto-renewed without my knowledge (or warning) and I ended up losing my credit card. I got most of my money back. But losing the card is what hurt – to some degree. This is something I will touch on again later – and the way that you can overcome it.

 

Notice the Pattern?

It took 30 years from case 1 to case 2. Then it picked up speed and now repeats every 2 years.

And it is not just fraud but blatant money-grabbing and the card-holder has very few ways to fight back except for inconveniencing him/her-self.

Cases is known where 3-star generals were caught with 2,500 blanks which they were busy turning into fraudulent cards which were for sale at USD2,000 but with $10,000 loaded. That is aside from having been caught with the Reserve Bank signatures for printing false notes – which has not been configured into the $16.3B fraud.

 

Just One of the Frauds

Credit card fraud is just one way to become a victim. Other fraud activities include:

  • Cloning / phishing / skimming at ATM’s and other sites.
  • Account take-over (often via changing the victim’s address details – physical and or email.
  • Card users themselves also “clean out” their cards and then run away.
  • “Friendly fraud” perpetrated by someone whom the victim knows. These are often not reported due to people trying to protect relationships / family. However, these cases are starting to appear with regularity on some current affairs programs.

 

How to Fight Back

I spoke with my bank representative two days ago who informed me that she herself is now fighting 2 cases of fraud involving her credit card number. She has settled one so far.

  • Keep you card in a safe place (on your person is one way, depending on your movements and location). In fact, check your cards from time to time.
  • Study your statements every month.
  • Report any breach or loss of a card immediately.
  • Gather supportive information to prove where you had been at the time. In my case it was my passport that came to the rescue.
  • Do not give up, even if the bank seems to tread water (which was in my instance number 4 above. I eventually made enough public noise that my case was taken into a private office and settled but not after I was threatened with them calling the police – which I said I would welcome).
  • Think very hard who you give your credit card details to, especially in today’s internet shopping world. I spoke to my lawyer yesterday and her response was “giving your credit card number to someone (person or company) is like giving them a signed cheque” to which I would like to add “several signed blank cheques”.
  • Whatever you buy / when you eat out, and pay for by credit card, check the relevant paperwork before leaving the queue. Years ago, when cards were still imprinted, I used to follow the person to the pay point and forced them to do the imprint in front of me – also taking with me all “bad imprints”. I never left them behind since there was a market for those.

 

There are more ways to protect yourself – some of which will be covered in an upcoming book – but it causes some inconvenience to yourself.